<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C.
20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from____________________________to__________________________
Commission file number 1-812
UNITED TECHNOLOGIES CORPORATION
DELAWARE 06-0570975
One Financial Plaza, Hartford, Connecticut 06101
(860) 728-7000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
At March 31, 1999 there were 225,753,606 shares of Common Stock outstanding,
which does not reflect a two-for-one stock split of the Registrant's Common
Stock announced on April 30, 1999 and payable on May 17, 1999 in the form of a
stock dividend to shareowners of record at the close of business on May 7, 1999.
<PAGE>
<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended March 31, 1999
Page
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statement of 1
Operations for the quarters ended March
31, 1999 and 1998
Condensed Consolidated Balance Sheet at March 2
31, 1999 and December 31, 1998
Condensed Consolidated Statement of Cash 3
Flows for the quarters ended March 31,
1999 and 1998
Notes to Condensed Consolidated Financial 4
Statements
Report of Independent Accountants 9
Item 2. Management's Discussion and Analysis of 10
Results of Operations and Financial Position
Part II - Other Information
Item 1. Legal Proceedings 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
Exhibit Index
<PAGE>
<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Quarter Ended
March 31,
In Millions of Dollars (except per share amounts) 1999 1998
<S> <C> <C>
Revenues:
Product sales $ 3,980 $ 3,931
Service sales 1,402 1,289
Financing revenues and other income, net 60 88
5,442 5,308
Costs and expenses:
Cost of products sold 3,110 3,145
Cost of services sold 867 816
Research and development 274 277
Selling, general and administrative 701 661
Interest 55 47
5,007 4,946
Income from continuing operations before income taxes
and minority interests 435 362
Income taxes 136 114
Minority interests 21 19
Income from continuing operations 278 229
Discontinued operation:
Income from operations of discontinued UT Automotive
subsidiary (net of applicable income tax provisions
of $15 in 1999 and 1998) 30 31
Net Income $ 308 $ 260
Earnings per share of common stock*:
Continuing Operations:
Basic $ .60 $ .48
Diluted $ .57 $ .46
Discontinued Operation:
Basic $ .07 $ .07
Diluted $ .06 $ .06
Net earnings per share:
Basic $ .67 $ .55
Diluted $ .63 $ .52
Dividends per share of common stock* $ .180 $ .155
Average number of shares outstanding (in millions)*
Basic 451 459
Diluted 492 498
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
*Reflects two-for-one stock split as described in Notes to Condensed
Consolidated Financial Statements.
1<PAGE>
<PAGE> 2
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
<S> <C> <C>
March 31, December 31,
In Millions of Dollars 1999 1998
(Unaudited)
</TABLE>
Assets
<TABLE><CAPTION>
<S> <C> <C>
Cash and cash equivalents $ 657 $ 550
Accounts receivable, net 3,418 3,417
Inventories and contracts in progress, net 3,302 3,191
Future income tax benefits 1,198 1,222
Other current assets 228 161
Net investment in discontinued operation 1,255 1,287
Total Current Assets 10,058 9,828
Fixed assets 9,495 9,549
Less - accumulated depreciation (6,034) (5,994)
3,461 3,555
Goodwill 1,404 1,417
Other assets 2,989 2,968
Total Assets $ 17,912 $ 17,768
</TABLE>
Liabilities and Shareowners' Equity
<TABLE><CAPTION>
<S> <C> <C>
Long-term debt currently due $ 100 $ 99
Short-term borrowings 541 504
Accounts payable 1,648 1,860
Accrued liabilities 5,092 4,719
Total Current Liabilities 7,381 7,182
Long-term debt 1,553 1,570
Future pension and postretirement benefit obligations 1,679 1,682
Other long-term liabilities 2,346 2,500
Series A ESOP Convertible Preferred Stock 827 836
ESOP deferred compensation (373) (380)
454 456
Shareowners' Equity:
Common Stock 2,818 2,708
Treasury Stock (3,212) (3,117)
Retained earnings 5,595 5,411
Accumulated other non-shareowner changes in
equity (702) (624)
4,499 4,378
Total Liabilities and Shareowners' Equity $ 17,912 $ 17,768
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
2<PAGE>
<PAGE> 3
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Quarter Ended
March 31,
In Millions of Dollars 1999 1998
<S> <C> <C>
Operating activities:
Income from continuing operations $ 278 $ 229
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation and amortization 183 181
Deferred income tax provision (benefit) 50 (81)
Change in:
Accounts receivable (108) (257)
Inventories and contracts in progress (138) (85)
Accounts payable and accrued liabilities 201 382
Other current assets (71) 77
Other, net (19) 70
Net cash flows provided by operating
activities 376 516
Investing activities:
Capital expenditures (129) (106)
Acquisitions of business units (95) (235)
Disposition of business unit 43 -
Increase in customer financing assets, net (11) (84)
Other, net 6 33
Net cash flows used in investing activities (186) (392)
Financing activities:
Issuance of long-term debt - -
Repayments of long-term debt (14) (63)
Increase (decrease) in short-term borrowings, net 53 (15)
Dividends paid on Common Stock (81) (71)
Common Stock repurchase (97) (89)
Other, net 55 53
Net cash flows used in financing activities (84) (185)
Net cash flows provided by discontinued operation 30 31
Effect of foreign exchange rate changes on Cash and
cash equivalents (29) (6)
Net increase (decrease) in Cash and cash
equivalents 107 (36)
Cash and cash equivalents, beginning of year 550 655
Cash and cash equivalents, end of period $ 657 $ 619
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3<PAGE>
<PAGE> 4
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Financial Statements at March 31, 1999 and for the
quarters ended March 31, 1999 and 1998 are unaudited, but in the opinion of the
Corporation include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
period. Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.
Total non-shareowner changes in equity includes all changes in equity during
a period except those resulting from investments by and distributions to
shareowners. The specific components include: net income, deferred gains and
losses resulting from foreign currency translation and minimum pension liability
adjustments. Total non-shareowner changes in equity were $230 million in the
first quarter of 1999, compared to $263 million in the same period of 1998.
Recent Developments
Disposition of UT Automotive
On May 4, 1999, the Corporation sold its UT Automotive unit to Lear
Corporation (Lear) for $2.3 billion. Net cash proceeds from the sale will be
approximately $2.1 billion after payment of taxes. An after-tax gain of
approximately $600 million will be recognized in the second quarter of 1999
along with approximately one month of UT Automotive earnings. UT Automotive net
assets appear in these Consolidated Financial Statements as a net investment in
a discontinued operation and related results as income from operations of the
discontinued UT Automotive subsidiary.
Pending Acquisition
On February 22, 1999, the Corporation announced an agreement to acquire
Sundstrand Corporation, for consideration of cash and stock, in a merger valued
at approximately $4.3 billion, including assumed debt.
The merger is subject to customary conditions including approvals by
Sundstrand shareowners and approval by U.S. and foreign regulatory agencies. The
merger will be accounted for using the purchase method and is expected to close
in mid-June.
In 1998, Sundstrand had $2.0 billion in revenues and $226 million in net
income.
The Corporation plans to finance the cash portion of the purchase price with
the after-tax cash proceeds from the sale of its UT Automotive unit discussed
above and through the issuance of long-term and medium-term debt. These
financings will result in higher interest expense in future periods and higher
levels of debt to capital.
Shelf Registration Statement
In April, the Corporation filed a registration statement with the Securities
and Exchange Commission concerning the issuance of up to $529 million in debt
securities. The registration statement became effective on April 16, 1999. The
total amount of medium-term and long-term debt that could be issued by the
Corporation under this and a previous registration statement is $1.0 billion.
4<PAGE>
<PAGE> 5
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
The proceeds from the potential issuance of debt securities would be used for
general corporate purposes, acquisitions and repurchases of the Corporation's
common stock.
Stock Split
On April 30, 1999, the Corporation announced a two-for-one stock split
payable on May 17, 1999 in the form of a stock dividend to shareowners of record
at the close of business on May 7, 1999. All share and per share information in
the Condensed Consolidated Financial Statements reflect the stock split.
Cost Reduction Efforts
During 1998, the Corporation recorded pre-tax charges totaling $320 million
related to ongoing efforts to reduce costs of its continuing operations in
response to an increasingly competitive business environment. Charges were
recorded in each of the Corporation's operating segments with the majority
relating to the Pratt & Whitney, Otis and Carrier operations. The amounts were
primarily recorded in cost of sales and relate to workforce reductions of
approximately 7,500 employees, plant closings and charges associated with asset
impairments. Approximately 4,800 employees were terminated as of March 31,
1999. The remaining terminations and plant closings are planned to be completed
by December of this year.
The following table summarizes the costs associated with these actions.
<TABLE><CAPTION>
Severance
and Other Asset
Related Exit Write-
In Millions of Dollars Costs Costs Downs Total
<S> <C> <C> <C> <C>
1998 Charges $ 266 $ 5 $ 49 $ 320
Utilized through
3/31/99 176 2 49 227
Remaining $ 90 $ 3 $ - $ 93
</TABLE>
The Corporation expects to record additional cost reduction charges
throughout the remainder of 1999 across all operating segments in order to
further reduce costs and streamline the operations.
5<PAGE>
<PAGE> 6
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Contingent Liabilities
There has been no significant change in the Corporation's material
contingencies during 1999, however, the matters previously described in Note 14
of the Notes to Consolidated Financial Statements in the Corporation's Annual
Report, incorporated by reference in the Corporation's Annual Report on Form 10-
K for calendar year 1998, are summarized below.
Environmental
The Corporation's operations are subject to environmental regulation by
federal, state and local authorities in the United States and regulatory
authorities with jurisdiction over its foreign operations.
Environmental investigatory, remediation, operating and maintenance costs are
accrued when it is probable that a liability has been incurred and the amount
can be reasonably estimated. The most likely cost to be incurred is accrued
based on an evaluation of currently available facts with respect to each
individual site, including existing technology, current laws and regulations and
prior remediation experience. Where no amount within a range of estimates is
more likely, the minimum is accrued. For sites with multiple responsible
parties, the Corporation considers its likely proportionate share of the
anticipated remediation costs and the ability of the other parties to fulfill
their obligations in establishing a provision for those costs. Liabilities with
fixed or reliably determinable future cash payments are discounted.
The Corporation maintains property insurance with a number of insurance
companies. Litigation is continuing against one of the Corporation's historical
property insurers seeking coverage for environmental costs incurred at certain
facilities. The litigation is expected to last several years. Environmental
liabilities are not reduced by potential insurance reimbursements.
As discussed above, the Corporation has accrued for the costs of
environmental remediation activities and periodically reassesses these amounts.
Management believes that losses materially in excess of amounts accrued are not
reasonably possible.
U.S. Government
The Corporation is now and believes that, in light of the current government
contracting environment, it will be the subject of one or more government
investigations. If the Corporation or one of its business units were charged
with wrongdoing as a result of any of these investigations, the Corporation or
one of its business units could be suspended from bidding on or receiving awards
of new government contracts pending the completion of legal proceedings. If
convicted or found liable, the Corporation could be fined and debarred from new
government contracting for a period generally not to exceed three years. Any
contracts found to be tainted by fraud could be voided by the Government.
The Corporation's contracts with the U.S. Government are also subject to
audits. Like many defense contractors, the Corporation has received audit
reports which recommend that certain contract prices should be reduced to comply
with various government regulations. Some of these audit reports involve
substantial amounts. The Corporation has made voluntary refunds in those cases
it believes appropriate.
6<PAGE>
<PAGE> 7
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Other
The Corporation extends performance and operating cost guarantees beyond its
normal warranty and service policies for extended periods on some of its
products, particularly commercial aircraft engines. Liability under such
guarantees is contingent upon future product performance and durability. The
Corporation has accrued its estimated liability that may result under these
guarantees.
The Corporation also has other commitments and contingent liabilities related
to legal proceedings and matters arising out of the normal course of business.
The Corporation has accrued for environmental investigatory, remediation,
operating and maintenance costs, performance guarantees and other litigation and
claims based on management's estimate of the probable outcome of these matters.
While it is possible that the outcome of these matters may differ from the
recorded liability, management believes that resolution of these matters will
not have a material impact on the Corporation's financial position, results of
operations or cash flows.
7<PAGE>
<PAGE> 8
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE><CAPTION>
Earnings Per Share
Quarter Ended
March 31,
In Millions of Dollars 1999 1998
<S> <C> <C>
Income from continuing
operations $ 278 $ 229
Less: ESOP Stock dividends (8) (8)
Basic Earnings from continuing
operations 270 221
ESOP Stock adjustment 7 6
Diluted earnings from
continuing operations $ 277 $ 227
Income from discontinued
operation, net of tax $ 30 $ 31
Net Income $ 308 $ 260
Less: ESOP Stock dividends (8) (8)
Basic earnings 300 252
ESOP Stock adjustment 7 6
Diluted earnings $ 307 $ 258
Average shares (in millions)*:
Basic 451 459
Stock awards 14 12
ESOP Stock 27 27
Diluted 492 498
Earnings per share of common
stock*:
Continuing operations:
Basic $ .60 $ .48
Diluted $ .57 $ .46
Discontinued operations:
Basic $ .07 $ .07
Diluted $ .06 $ .06
Net earnings per share:
Basic $ .67 $ .55
Diluted $ .63 $ .52
</TABLE>
*Reflects two-for-one stock split as described in Notes to Condensed
Consolidated Financial Statements.
8<PAGE>
<PAGE> 9
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
With respect to the unaudited condensed consolidated financial information of
United Technologies Corporation for the quarters ended March 31, 1999 and 1998,
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report dated April 20, 1999
appearing below, states that they did not audit and they do not express an
opinion on that unaudited condensed consolidated financial information.
PricewaterhouseCoopers has not carried out any significant or additional audit
tests beyond those which would have been necessary if their report had not been
included. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. PricewaterhouseCoopers is not subject to the liability
provisions of section 11 of the Securities Act of 1933 ("the Act") for their
report on the unaudited condensed consolidated financial information because
that report is not a "report" or a "part" of the registration statement prepared
or certified by PricewaterhouseCoopers within the meaning of sections 7 and 11
of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners of
United Technologies Corporation
We have reviewed the accompanying condensed consolidated statement of
operations of United Technologies Corporation and consolidated subsidiaries for
the quarters ended March 31, 1999 and 1998, the condensed consolidated statement
of cash flows for the quarters ended March 31, 1999 and 1998, and the condensed
consolidated balance sheet as of March 31, 1999. This financial information is
the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, and the
related consolidated statements of operations, of changes in shareowners' equity
and of cash flows for the year then ended (not presented herein), and in our
report dated January 21, 1999 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1998,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 20, 1999
9<PAGE>
<PAGE> 10
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL POSITION
BUSINESS ENVIRONMENT
The Corporation's operations are classified into five principal operating
segments. Carrier and Otis serve customers in the commercial property and
residential housing industries. Pratt & Whitney and the Flight Systems segment,
which includes Sikorsky Aircraft and Hamilton Standard, serve commercial and
government customers in the aerospace industry. UT Automotive serves customers
in the automotive industry. Refer to Notes to Condensed Consolidated Financial
Statements for discussion of the sale of UT Automotive to Lear Corporation which
occurred on May 4, 1999. As worldwide businesses, the Corporation's operations
are affected by global and regional economic factors. However, the diversity of
the Corporation's businesses and global market presence has helped limit the
impact of any one industry or the economy of any single country on the
consolidated results.
The Asian economic crisis has significantly slowed growth in the region since
the latter part of 1997. Tightening of credit in Asia has restricted available
financing for new construction and slowed the completion of projects currently
underway, resulting in less activity compared to pre-crisis years. While
recognizing that the Asian economic downturn will likely continue during 1999,
management believes the long-term economic growth prospects of the region remain
intact. Therefore, the Corporation's Asian investment strategy continues to
focus on the long-term infrastructure requirements of the region.
During the first quarter of 1999, the Brazilian Real devalued significantly,
triggering a destabilizing effect throughout Latin America. The impact of this
devaluation could result in slower near-term growth in the region.
Worldwide airline profits, traffic growth and load factors have been reliable
indicators for new aircraft and after-market orders. U.S. and European airlines
are experiencing continued profitability driven primarily by low fuel prices and
the effect of cost reduction programs. Airlines in the Asia Pacific and Latin
American regions have suffered declines in operating results reflecting weaker
local economies. This erosion in earnings has resulted in a decrease in new
orders for aerospace products and cancelations or deferrals of existing orders
throughout the industry. The impact of the Asian and Latin American economic
downturn or a slowdown in the aviation industry, as a whole, will likely result
in lower manufacturing volumes in the near term.
The defense portion of the Corporation's aerospace businesses continues to
respond to a changing global political environment. The U.S. defense industry
continues to downsize and consolidate in response to continued pressure on U.S.
defense spending.
10<PAGE>
<PAGE> 11
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
RESULTS OF CONTINUING OPERATIONS
Consolidated revenues and margin percentages were as follows:
<TABLE><CAPTION>
Quarter Ended
March 31,
In Millions of Dollars 1999 1998
<S> <C> <C>
Sales $ 5,382 $ 5,220
Financing revenues and
other income, net 60 88
Revenues $ 5,442 $ 5,308
Gross margin % 26.1% 24.1%
</TABLE>
Consolidated revenues for the first quarter of 1999 were 3% higher than the
first quarter of 1998, primarily driven by growth at Pratt & Whitney and Otis
partly offset by a Sikorsky driven decline at Flight Systems.
Financing revenues and other income, net, decreased $28 million in the first
quarter of 1999 compared to the first quarter of 1998. The first quarter 1998
results reflect the settlement of a contract dispute with the U.S. Government.
Gross margin as a percentage of sales increased two percentage points in the
first quarter of 1999 compared to the same period of 1998 due to improvements at
all business units, but primarily at Carrier and Otis.
Research and development spending decreased $3 million (1%) in the first
quarter of 1999 compared to 1998. As a percentage of sales, research and
development was 5.1% in the first quarter of 1999 compared to 5.3% in the same
period of 1998. Research and development spending in 1999 is expected to remain
at approximately 5% of sales.
Selling, general and administrative expenses increased $40 million (6%) in
the first quarter of 1999 compared to 1998 due to increases in most segments.
As a percent of sales, these expenses increased to 13.0% in the first quarter of
1999 from 12.7% in the same period of 1998, due to increases at Flight Systems,
Carrier and Pratt & Whitney.
The effective income tax rate for the first quarter of 1999 was 31.3%
compared to 31.5% for the first quarter of 1998. The Corporation has continued
to lower its effective income tax rate by implementing tax reduction strategies.
11<PAGE>
<PAGE> 12
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Revenues and operating profits of the Corporation's principal operating
segments for the quarters ended March 31, 1999 and 1998 are as follows (in
millions of dollars):
<TABLE><CAPTION>
Operating
Revenues Operating Profits Profit Margin
Quarter Ended March 1999 1998 1999 1998 1999 1998
31,
<S> <C> <C> <C> <C> <C> <C>
Otis $ 1,363 $ 1,322 $ 155 $ 98 11.4% 7.4%
Carrier 1,510 1,498 91 18 6.0% 1.2%
Pratt & Whitney 2,019 1,916 280 293 13.9% 15.3%
Flight Systems 606 676 40 65 6.6% 9.6%
UT Automotive 810 729 47 49 5.8% 6.7%
Total segment 6,308 6,141 613 523 9.7% 8.5%
Eliminations and
Other (56) (104) (11) (10)
General corporate
expenses - - (65) (55)
Discontinued
operation (810) (729) (47) (49)
Consolidated $ 5,442 $ 5,308 490 409
Interest expense (55) (47)
Consolidated income from
continuing operations
before income taxes and
minority interests $ 435 $ 362
</TABLE>
Otis revenues increased 3% in the first quarter of 1999 compared to the first
quarter of 1998. The increase in revenues was due to increases in Europe and
North America partially offset by declines in the Asia Pacific and Latin
American operations.
Otis operating profits increased $57 million in the first quarter of 1999
compared to the first quarter of 1998. 1998 results include charges related to
salaried workforce reductions and the consolidation of manufacturing and
engineering facilities. Operating profits improved in all operations except
Latin America compared to the first quarter of 1998.
Carrier revenues increased 1% in the first quarter of 1999 compared to the
first quarter of 1998. The increase in revenues was due to the impact of
acquisitions, increases in Refrigeration Operations and in Europe, offset by
declines in Latin American and the Asia Pacific operations.
Carrier operating profits increased $73 million in the first quarter of 1999
compared to the first quarter of 1998. Results in 1998 include charges related
to workforce reductions, plant closures and implementation of a new
manufacturing strategy in the rotary chiller business. In addition, operating
profits improved in all operations compared to the first quarter of 1998.
Pratt & Whitney revenues increased 5% in the first quarter of 1999 compared
to the first quarter of 1998. The 1999 increase reflects higher after-market
revenues, primarily from the 1998 investment in an overhaul and repair joint
venture in Singapore, as well as increased military sales and commercial engine
12<PAGE>
<PAGE> 13
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
shipments. Revenues in 1998 benefited from the settlement of a contract dispute
with the U.S. Government.
Pratt & Whitney operating profits decreased $13 million (4%) in the first
quarter of 1999 compared to the first quarter of 1998. The quarter-over-quarter
comparison includes the impact of the settlement of a contract dispute with the
U.S. Government in the first quarter of 1998. In addition, the 1999 results
reflect improvement in the military engine and overhaul and repair businesses.
Flight Systems revenues decreased 10% in the first quarter of 1999 compared
to the first quarter of 1998. Revenue increases at Hamilton Standard, resulting
primarily from the 1998 acquisition of a French aerospace components
manufacturer, were more than offset by lower revenues at Sikorsky due to the
timing of helicopter deliveries.
Flight Systems operating profits decreased $25 million (38%) in the first
quarter of 1999 compared to the first quarter of 1998 as improvements at
Hamilton Standard, resulting primarily from the 1998 acquisition of a French
aerospace components manufacturer, were more than offset by declines at Sikorsky
due to lower revenues.
UT Automotive revenues increased 11% in the first quarter of 1999 compared to
the first quarter of 1998, due to volume increases in all businesses.
UT Automotive operating profits decreased $2 million (4%) in the first
quarter of 1999 compared to the first quarter of 1998 primarily due to declines
in both the electrical and interiors businesses as a result of continued
operational issues and OEM pricing pressures.
Refer to Notes to Condensed Consolidated Financial Statements for discussion
of the sale of UT Automotive to Lear Corporation which occurred on May 4, 1999.
13<PAGE>
<PAGE> 14
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
FINANCIAL POSITION AND LIQUIDITY
Management assesses the Corporation's liquidity in terms of its overall
ability to generate cash to fund its operating and investing activities.
Significant factors affecting the management of liquidity are cash flows
generated from operating activities, capital expenditures, acquisitions,
customer financing requirements, common stock repurchases, adequate bank lines
of credit and financial flexibility to attract long-term capital with
satisfactory terms.
Set forth below is selected key cash flow data:
<TABLE><CAPTION>
Quarter Ended
March 31,
In Millions of Dollars 1999 1998
<S> <C> <C>
Operating Activities
Net cash flows provided by operating
activities $ 376 $ 516
Investing Activities
Capital expenditures (129) (106)
Acquisitions of business units (95) (235)
Disposition of business unit 43 -
Increase in customer financing assets, net (11) (84)
Financing Activities
Common Stock repurchase (97) (89)
Increase (Decrease) in total debt 21 (55)
Decrease in net debt (86) (19)
</TABLE>
Cash flows provided by operating activities were $376 million during the
first quarter of 1999 compared to $516 million for the first quarter of 1998.
The decrease resulted from lower working capital performance partly offset by
improved operating performance.
Cash flows used in investing activities were a use of funds of $186 million
during the first quarter of 1999 compared to a use of $392 million in the first
quarter of 1998. Capital expenditures in the first quarter of 1999 were $129
million, a $23 million increase from the corresponding period of 1998. The
Corporation invested $95 million in the acquisition of businesses, including
Carrier's investment in a joint venture in Japan. Current year proceeds
from the disposition of business unit represents Hamilton Standard's sale of
a microelectronic controls business. Customer financing activity was a net use
of cash of $11 million in the first quarter of 1999, compared to an $84 million
net use of cash in the first quarter of 1998, primarily as a result of first
quarter 1998 funding for an airline customer. While the Corporation expects
1999 customer financing activity will be a net use of funds, actual funding
is subject to usage under existing customer financing commitments during the
remainder of the year. The Corporation's total commitments to finance or
arrange financing of commercial aircraft and related equipment at March 31,
1999 were approximately $1.3 billion.
As described in Notes to the Condensed Consolidated Financial Statements the
Corporation filed a registration statement with the Securities and Exchange
14<PAGE>
<PAGE> 15
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Commission in April concerning the issuance of up to $529 million in debt
securities. The registration statement became effective on April 16, 1999. The
total amount of medium-term and long-term debt that could be issued by the
Corporation under this and a previous registration statement is $1.0 billion.
The proceeds from the potential issuance of debt securities would be used for
general corporate purposes, including financing a portion of the pending
acquisition of Sundstrand Corporation, other acquisitions and repurchases of the
Corporation's common stock.
The Corporation repurchased $97 million of Common Stock, representing 1.55
million shares, in the first quarter of 1999 under previously announced share
repurchase programs. The share repurchase program continues to be a use of the
Corporation's cash flows and has more than offset the dilutive effect resulting
from the issuance of stock under stock-based employee benefit programs.
Other selected financial data is as follows:
<TABLE><CAPTION>
March 31, December 31, March 31,
In Millions of Dollars 1999 1998 1998
<S> <C> <C> <C>
Cash and cash equivalents $ 657 $ 550 $ 619
Total debt 2,194 2,173 1,512
Net debt (total debt less cash) 1,537 1,623 893
Shareowners' equity 4,499 4,378 4,236
Debt-to-total capitalization 33% 33% 26%
Net debt-to-total capitalization 25% 27% 17%
</TABLE>
The Corporation manages its worldwide cash requirements considering available
funds among the many subsidiaries through which it conducts its business and the
cost effectiveness with which those funds can be accessed. The repatriation of
cash balances from certain of the Corporation's subsidiaries could have adverse
tax consequences; however, those balances are generally available without legal
restrictions to fund ordinary business operations. The Corporation has and will
continue to transfer cash from those subsidiaries to the parent and to other
international subsidiaries when it is cost effective to do so.
Management believes that its existing cash position and other available
sources of liquidity are sufficient to meet current and anticipated requirements
for the foreseeable future. Management anticipates the level of debt-to-capital
will increase during the remainder of the year in order to satisfy its various
cash flow requirements, including acquisition spending and continued share
repurchases.
Year 2000
The Corporation has developed a project plan to address the impact of the
Year 2000 on its internal systems, products and facilities, as well as its key
suppliers and customers. The project has strong executive sponsorship and has
been reviewed by an independent third party. The project consists of the
following phases: awareness, assessment, remediation, testing and contingency
planning.
15<PAGE>
<PAGE> 16
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
The Corporation has completed the awareness phase and has substantially
completed the assessment phase, with respect to its internal systems, products
and facilities. The Corporation is in the process of carrying out the
remediation and testing phases, which are expected to be substantially completed
by September 1999.
The Corporation has been assessing its Year 2000 risks related to significant
relationships with third parties via ongoing communication with its critical
suppliers and customers. As part of the process, the Corporation has requested
written assurances from these suppliers and customers that they have Year 2000
readiness programs in place, as well as an affirmation that they will be
compliant when necessary. Responses to these inquiries are currently being
gathered and reviewed. Further analysis, including site visits, will be
conducted as necessary. Activities related to third parties are scheduled to be
completed by September 1999. Despite these efforts, the Corporation can provide
no assurance that supplier and customer Year 2000 compliance plans will be
successfully completed in a timely manner.
The Corporation is taking steps to prevent major interruptions in the
business due to Year 2000 problems using both internal and external resources to
identify and correct problems and to test for readiness. The estimated
external costs of the project, including equipment costs and consultant and
software licensing fees, are expected to be approximately $140 million. Internal
costs, which are primarily payroll related, are expected to be approximately $55
million. These costs are being funded through operating cash flows with amounts
that would normally be budgeted for the Corporation's information systems and
production and facilities equipment. As of March 31, 1999, total costs of
external and internal resources incurred amounted to approximately $100 million
and relate primarily to internal systems, products and facilities. Although the
Corporation has been working on its Year 2000 readiness efforts for several
years, costs incurred prior to 1997 have not been separately tracked and are
generally not included in the estimate of total costs.
The schedule for completion and the estimated associated costs are based on
management's estimates, which include assumptions of future events. There can
be no assurance that the Corporation, its suppliers and customers will be fully
Year 2000 compliant by January 1, 2000. The Corporation, therefore, could be
adversely impacted by such things as loss of revenue, production delays, product
failures, lack of third party readiness and other business interruptions.
Accordingly, the Corporation has begun developing contingency plans to address
potential issues which include, among other actions, development of backup
procedures and identification of alternate suppliers. Contingency planning is
expected to be substantially completed by September 1999. The ultimate effects
on the Corporation or its suppliers or customers of not being fully Year 2000
compliant are not reasonably estimable. However, the Corporation believes its
Year 2000 remediation efforts, together with the diverse nature of its
businesses, help reduce the potential impact of non-compliance to levels which
will not have a material adverse impact on its financial position, results of
operations or cash flows.
16<PAGE>
<PAGE> 17
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
This report on Form 10-Q contains statements which, to the extent they are
not statements of historical or present fact, constitute "forward-looking
statements" under the securities laws. These forward-looking statements are
intended to provide Management's current expectations or plans for the future
operating and financial performance of the Corporation, based on assumptions
currently believed to be valid. Forward-looking statements can be identified by
the use of words such as "believe", "expect", "plans", "strategy", "prospects",
"estimate", "project", "anticipate" and other words of similar meaning in
connection with a discussion of future operating or financial performance.
These include, among others, statements relating to:
. the effect of economic downturns or growth in particular regions
. the effect of changes in the level of activity in particular industries or
markets
. the anticipated uses of cash
. the scope or nature of acquisition activity
. prospective product developments
. cost reduction efforts
. the outcome of contingencies
. the impact of Year 2000 conversion efforts
From time to time, oral or written forward-looking statements may also be
included in other materials released to the public.
All forward-looking statements involve risks and uncertainties that may cause
actual results to differ materially from those expressed or implied in the
forward-looking statements. For additional information identifying factors that
may cause actual results to vary materially from those stated in the forward-
looking statements, see the Corporation's reports on forms 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission from time to time. The
Corporation's Annual Report on Form 10-K for 1998 includes important information
as to risk factors in the "Business" section under the headings "Description of
Business by Operating Segment" and "Other Matters Relating to the Corporation's
Business as a Whole". Additional important information as to risk factors is
included in this report in the section titled "Management's Discussion and
Analysis of Results of Operations and Financial Position" under the headings
"Business Environment" and "Year 2000".
17<PAGE>
<PAGE> 18
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Part II - Other Information
Item 1 - Legal Proceedings
In March, 1999, the Department of Justice filed a civil False Claims Act
complaint against the Corporation in the United States District Court for the
Southern District of Ohio (Western Division), No. C-3-99-093. This lawsuit,
previously reported as a proceeding contemplated by the government, is related
to the "Fighter Engine Competition" between Pratt & Whitney's F100 engine and
GE's F110 engine, for contracts awarded by the U.S. Air Force between Fiscal
Years 1985 and 1990, inclusive. The government alleges that Pratt & Whitney
inflated its estimated costs for purchased parts and withheld data that would
have revealed the overstatements. The government seeks damages of at least $75
million (some portion of which would be trebled) plus penalties of up to $10,000
per claim submitted.
The Corporation does not believe that resolution of the litigation discussed
above will have a material adverse effect upon the Corporation's competitive
position, results of operations, cash flow or financial position.
Except as noted above, there have been no material developments in legal
proceedings during the first quarter of 1999. For a description of previously
reported legal proceedings, refer to Part I, Item 3 - Legal Proceedings of the
Corporation's Annual Report on Form 10-K for calendar year 1998.
18<PAGE>
<PAGE> 19
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Item 5 - Other Information
On May 4, 1999, the Corporation completed the sale of its UT Automotive
operations to Lear Corporation for $2.3 billion in cash, subject to a post-
closing adjustment based on working capital and cash. The financial terms of
the sale were determined by negotiations between the Corporation and Lear. The
UT Automotive unit was a supplier of automotive electrical distribution systems
and related components in the Americas and Europe and a supplier in North
America of modular headliners, instrument panels, door trim assemblies, vehicle
remote entry systems, and fractional horsepower DC electric motors used in
commercial and industrial applications. The UT Automotive unit also produced
other products such as interior trim, mirrors, thermal and acoustical barriers,
airbag covers, electronic controls and modules, engine cooling modules, interior
lighting systems, windshield wiper systems, and electrical starters for
commercial applications. The foregoing description of the sale is qualified in
its entirety by reference to the Stock Purchase Agreement between a wholly owned
subsidiary of the Corporation and Lear, dated as of March 16, 1999, which is
included as an exhibit to this Form 10-Q and incorporated herein by reference.
The following Unaudited Pro Forma Condensed Balance Sheet has been adjusted
to reflect the sale of UT Automotive as though it had occurred on March 31,
1999. This adjustment reflects net cash proceeds of approximately $2.1 billion
after payment of taxes and the estimated gain on the sale after the accrual of
other transaction related expenses. The following Unaudited Pro Forma Condensed
Statements of Operations reflect UT Automotive as a discontinued operation for
the years ended December 31, 1998, 1997 and 1996 and do not reflect the
effects of the gain or proceeds.
The Consolidated Condensed Statement of Operations for the quarters ended
March 31, 1999 and 1998, which reflects UT Automotive as a discontinued
operation and the Consolidated Condensed Balance Sheet as of March 31, 1999 and
December 31, 1998, which reflects UT Automotive as a net investment in a
discontinued operation, can be found under Item 1, pages 1 and 2, of this Form
10-Q.
The Pro Forma Condensed Financial Statements should be read in conjunction
with the Corporation's historical financial statements. The pro forma
information presented is for informational purposes only and it is not
necessarily indicative of future earnings or financial position or of what the
earnings or financial position would have been had the sale of UT Automotive
been completed on March 31, 1999. Historical financial statements can be found
in the Corporation's 1998 Form 10-K filed on February 16, 1999.
On April 30, 1999, the Corporation announced a two-for-one stock split
payable in the form of a stock dividend on May 17, 1999 to shareowners of record
at the close of business on May 7, 1999. All common share and per share amounts
presented in the Pro Forma Condensed Statements of Operations reflect the stock
split.
19<PAGE>
<PAGE> 20
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE><CAPTION>
Reported Pro Forma
United UT United
Technologies Automotive Technologies
In Millions of Dollars Corporation Adjustment Corporation
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 657 $ 2,100 $ 2,757
Accounts receivable, net 3,418 - 3,418
Inventories and contracts in
progress, net 3,302 - 3,302
Future income tax benefits 1,198 - 1,198
Other current assets 228 - 228
Net investment in discontinued
operation 1,255 (1,255) -
Total Current Assets 10,058 845 10,903
Fixed Assets 9,495 - 9,495
Less - accumulated
depreciation (6,034) - (6,034)
3,461 - 3,461
Goodwill 1,404 - 1,404
Other Assets 2,989 - 2,989
Total Assets $ 17,912 $ 845 $ 18,757
Liabilities and Shareowners'
Equity
Long-term debt currently due $ 100 $ - $ 100
Short-term borrowings 541 - 541
Accounts payable 1,648 - 1,648
Accrued liabilities 5,092 245 5,337
Total Current Liabilities 7,381 245 7,626
Long-term debt 1,553 - 1,553
Future pension and
postretirement benefit
obligations 1,679 - 1,679
Other long-term liabilities 2,346 - 2,346
Series A ESOP Convertible
Preferred Stock 827 - 827
ESOP deferred compensation (373) - (373)
454 - 454
Shareowners' Equity:
Common Stock 2,818 - 2,818
Treasury Stock (3,212) - (3,212)
Retained Earnings 5,595 600 6,195
Accumulated other non-
shareowner changes in
equity (702) - (702)
4,499 600 5,099
Total Liabilities and $ 17,912 $ 845 $ 18,757
Shareowners' Equity
</TABLE>
20<PAGE>
<PAGE> 21
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Reported Pro Forma
United UT United
In Millions of dollars (except Technologies Automotive Technologies
per share amounts) Corporation Adjustment Corporation
<S> <C> <C> <C>
Product sales $ 20,248 $ (2,900) $ 17,348
Service sales 5,439 - 5,439
Financing revenues and other
income, net 28 (6) 22
25,715 (2,906) 22,809
Cost of products sold 15,815 (2,379) 13,436
Cost of services sold 3,461 - 3,461
Research and development 1,315 (147) 1,168
Selling, general and
administrative 2,957 (220) 2,737
Interest 204 (7) 197
23,752 (2,753) 20,999
Income from continuing
operations before income taxes
and minority interests 1,963 (153) 1,810
Income taxes 623 (55) 568
Minority interests 85 - 85
Income from continuing
operations $ 1,255 $ (98) $ 1,157
Discontinued Operation:
Income from operations of
discontinued UT Automotive
subsidiary (net of applicable
income tax provision of $55
million) - 98 98
Net Income $ 1,255 $ - $ 1,255
</TABLE>
21<PAGE>
<PAGE> 22
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Reported Pro Forma
United UT United
Technologies Automotive Technologies
Corporation Adjustment Corporation
<S> <C> <C> <C>
Earnings Per Share of Common
Stock*:
Continuing Operations:
Basic:
Average shares (millions) 456 456
Earnings per share $ 2.68 $ 2.47
Diluted:
Average shares (millions) 495 495
Earnings per share $ 2.53 $ 2.33
Discontinued Operation:
Basic:
Average shares (millions) 456 456
Earnings per share $ - $ 0.21
Diluted:
Average shares (millions) 495 495
Earnings per share $ - $ 0.20
Net Earnings Per Share:
Basic:
Average shares (millions) 456 456
Earnings per share $ 2.68 $ 2.68
Diluted:
Average shares (millions) 495 495
Earnings per share $ 2.53 $ 2.53
*Reflects two-for-one stock split as described in Notes to Condensed
Consolidated Financial Statements which can be found in Item 1.
</TABLE>
22<PAGE>
<PAGE> 23
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Reported Pro Forma
United UT United
In Millions of dollars (except Technologies Automotive Technologies
per share amounts) Corporation Adjustment Corporation
<S> <C> <C> <C>
Product sales $ 18,873 $ (2,927) $ 15,946
Service sales 5,116 - 5,116
Financing revenues and other
income, net 233 (7) 226
24,222 (2,934) 21,288
Cost of products sold 15,080 (2,442) 12,638
Cost of services sold 3,208 - 3,208
Research and development 1,187 (118) 1,069
Selling, general and
administrative 2,820 (209) 2,611
Interest 191 (3) 188
22,486 (2,772) 19,714
Income from continuing
operations before income taxes
and minority interests 1,736 (162) 1,574
Income taxes 565 (51) 514
Minority interests 99 (1) 98
Income from continuing
operations $ 1,072 $ (110) $ 962
Discontinued Operation:
Income from operations of
discontinued UT Automotive
subsidiary (net of applicable
income tax provision of $51
million) - 110 110
Net Income $ 1,072 $ - $ 1,072
</TABLE>
23<PAGE>
<PAGE> 24
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Reported Pro Forma
United UT United
Technologies Automotive Technologies
Corporation Adjustment Corporation
<S> <C> <C> <C>
Earnings Per Share of Common
Stock*:
Continuing Operations:
Basic:
Average shares (millions) 469 469
Earnings per share $ 2.22 $ 1.99
Diluted:
Average shares (millions) 507 507
Earnings per share $ 2.11 $ 1.89
Discontinued Operation:
Basic:
Average shares (millions) 469 469
Earnings per share $ - $ 0.23
Diluted:
Average shares (millions) 507 507
Earnings per share $ - $ 0.22
Net Earnings Per Share:
Basic:
Average shares (millions) 469 469
Earnings per share $ 2.22 $ 2.22
Diluted:
Average shares (millions) 507 507
Earnings per share $ 2.11 $ 2.11
*Reflects two-for-one stock split as described in Notes to Condensed
Consolidated Financial Statements which can be found in Item 1.
</TABLE>
24<PAGE>
<PAGE> 25
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Reported Pro Forma
United UT United
In Millions of dollars (except Technologies Automotive Technologies
per share amounts) Corporation Adjustment Corporation
<S> <C> <C> <C>
Product sales $ 17,799 $ (3,086) $ 14,713
Service sales 4,989 - 4,989
Financing revenues and other
income, net 263 (93) 170
23,051 (3,179) 19,872
Cost of products sold 14,327 (2,674) 11,653
Cost of services sold 3,088 - 3,088
Research and development 1,122 (108) 1,014
Selling, general and
administrative 2,796 (209) 2,587
Interest 217 (4) 213
21,550 (2,995) 18,555
Income from continuing
operations before income taxes
and minority interests 1,501 (184) 1,317
Income taxes 494 (64) 430
Minority interests 101 (2) 99
Income from continuing
operations $ 906 $ (118) $ 788
Discontinued Operation:
Income from operations of
discontinued UT Automotive
subsidiary (net of applicable
income tax provision of $64
million) - 118 118
Net Income $ 906 $ - $ 906
</TABLE>
25<PAGE>
<PAGE> 26
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Reported Pro Forma
United UT United
Technologies Automotive Technologies
Corporation Adjustment Corporation
<S> <C> <C> <C>
Earnings Per Share of Common
Stock*:
Continuing Operations:
Basic:
Average shares (millions) 483 483
Earnings per share $ 1.82 $ 1.57
Diluted:
Average shares (millions) 517 517
Earnings per share $ 1.74 $ 1.51
Discontinued Operation:
Basic:
Average shares (millions) 483 483
Earnings per share $ - $ 0.25
Diluted:
Average shares (millions) 517 517
Earnings per share $ - $ 0.23
Net Earnings Per Share:
Basic:
Average shares (millions) 483 483
Earnings per share $ 1.82 $ 1.82
Diluted:
Average shares (millions) 517 517
Earnings per share $ 1.74 $ 1.74
*Reflects two-for-one stock split as described in Notes to Condensed
Consolidated Financial Statements which can be found in Item 1.
</TABLE>
26<PAGE>
<PAGE> 27
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Agreement, dated as of February 21, 1999, among United
Technologies Corporation, HSSail Inc. and Sundstrand Corporation,
incorporated by reference to United Technologies Corporation
Report on Form 8-K (Commission file number 1-812) dated February
21, 1999.
(10.2) Stock Purchase Agreement, dated as of March 16, 1999, by and
between Nevada Bond Investment Corp. II and Lear Corporation,
incorporated by reference to United Technologies Corporation
Report on Form 8-K (Commission file number 1-812) dated March
16,1999.
(12) Statement re computation of ratio of earnings to fixed charges.
(15) Letter re unaudited interim financial information.
(27) Financial data schedule (submitted electronically herewith).
(b) Reports on Form 8-K
A Report on Form 8-K dated February 21, 1999 was filed with the Commission
on February 23, 1999. The Report includes information under Item 5
concerning the announcement of a Merger Agreement dated February 21, 1999
among United Technologies Corporation, HSSail Inc. and Sundstrand
Corporation. The report also includes exhibits under Item 7 containing the
Merger Agreement and the related press release.
A Report on Form 8-K dated March 16, 1999 was filed with the Commission on
March 19, 1999. The Report includes information under Item 5 concerning
the announcement of a Stock Purchase Agreement dated March 16, 1999
pursuant to which the Corporation has agreed to sell its UT Automotive unit
to Lear Corporation. The report also includes exhibits under Item 7
containing the Stock Purchase Agreement and the related press release.
A Report on Form 8-K dated April 14, 1999 was filed with the Commission on
April 14, 1999. The Report includes information under Item 5 concerning
the previously announced sale of the Corporation's UT Automotive unit and
the Corporation's acquisition of Sundstrand Corporation. The pro forma
financial information reflecting the impact of these transactions is
included under Item 7.
A Report on Form 8-K dated April 30, 1999 was filed with the Commission on
May 4, 1999. The Report includes information under Item 5 concerning the
Corporation's announcement of a two-for-one stock spilt in the form of a
stock dividend.
27<PAGE>
<PAGE> 28
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED TECHNOLOGIES CORPORATION
Dated: May 14, 1999 By: /s/ David J. FitzPatrick
David J. FitzPatrick
Senior Vice President and
Chief Financial Officer
Dated: May 14, 1999 By: /s/ Jay L. Haberland
Jay L. Haberland
Vice President and Controller
Dated: May 14, 1999 By: /s/ William H. Trachsel
William H. Trachsel
Senior Vice President, General Counsel and
Secretary
28<PAGE>
<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit 12 - Statement re computation of ratio of earnings to fixed charges
Exhibit 15 - Letter re unaudited interim financial information
Exhibit 27 - Financial data schedule (submitted electronically herewith)<PAGE>
PAGE
<PAGE>
<PAGE>
<TABLE>
Exhibit 12
<CAPTION>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Quarter Ended
March 31,
In Millions of Dollars 1999 1998
<S> <C> <C>
Fixed Charges:
Interest expense $ 55 $ 47
Interest capitalized 4 3
One-third of rents* 20 19
Total Fixed Charges $ 79 $ 69
Earnings:
Income from continuing operations before income
taxes and minority interests $ 435 $ 362
Fixed charges per above 79 69
Less: interest capitalized (4) (3)
75 66
Amortization of interest capitalized 7 7
Total Earnings $ 517 $ 435
Ratio of Earnings to Fixed Charges 6.54 6.30
* Reasonable approximation of the interest factor.
/TABLE
<PAGE>
<PAGE>
Exhibit 15
May 14, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We are aware that United Technologies Corporation has included our report dated
April 22, 1998 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statements on Form S-3 (Nos. 333-26331, 33-46916, 33-40163, 33-34320, 33-31514,
33-29687, and 33-6452), in the Registration Statement on Form S-4 (No. 333-
77991) and in the Registration Statements on Form S-8 (Nos. 333-21853, 333-
18743, 333-21851, 33-57769, 33-45440, 33-11255, 33-26580, 33-26627, 33-28974,
33-51385, 33-58937 and 2-87322). We are also aware of our responsibilities
under the Securities Act of 1933.
Yours very truly,
PricewaterhouseCoopers LLP<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at March 31, 1999 (Unaudited) and the
Condensed Consolidated Statement of Operations for the three months ended March
31, 1999 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 657
<SECURITIES> 0
<RECEIVABLES> 3,731
<ALLOWANCES> 313
<INVENTORY> 3,302
<CURRENT-ASSETS> 10,058
<PP&E> 9,495
<DEPRECIATION> 6,034
<TOTAL-ASSETS> 17,912
<CURRENT-LIABILITIES> 7,381
<BONDS> 1,553
454
0
<COMMON> 2,818
<OTHER-SE> 1,681
<TOTAL-LIABILITY-AND-EQUITY> 17,912
<SALES> 3,980
<TOTAL-REVENUES> 5,442
<CGS> 3,110
<TOTAL-COSTS> 3,977
<OTHER-EXPENSES> 274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 435
<INCOME-TAX> 136
<INCOME-CONTINUING> 278
<DISCONTINUED> 30
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 308
<EPS-PRIMARY> .67<F1>
<EPS-DILUTED> .63<F1>
<FN>
<F1>The [EPS-PRIMARY] amount represents BASIC earnings per share and the
[EPS-DILUTED] amount represents DILUTED earnings per share in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share.
</FN>
</TABLE>
